Informational Rigidities and the Stickiness of Temporary Sales

NBER Working Paper No. 19350Issued in August 2013NBER Program(s): EFGIOME

Frequent price changes do not imply a rapid response of prices to economic shocks if the price changes are based on old information. We study the extent of such information "stickiness" for temporary sales. Institutionally, we describe how and why temporary sales are "sticky plans" that are updated infrequently, despite the occurrence of frequent price changes. We then study the empirical characteristics of sales and regular price changes using a unique dataset from a large retailer, containing direct measures of both regular prices and sales, in addition to wholesale prices. The timing and magnitude of regular price changes respond strongly to wholesale price changes and to aggregate economic shocks, while temporary sales are unresponsive. Finally, we show that sales account for the majority of the observed cross-sectional heterogeneity in the frequency of price changes, as well as the downward sloping hazard of retail price changes.

If you usually get free papers at work/university but do not at home,
you can either
connect to your work VPN or proxy (if any) or elect to have a link to the paper
emailed to your work email address below. The email address must be
connected to a
subscribing college, university, or other subscribing institution.
Gmail and other free email addresses will not have access.

Support

The research activities of the NBER are funded by grants from federal research agencies, by private foundations, and by generous donations from our corporate associates and from private individuals. The NBER is a non-profit, 501(c)(3) organization. For information on supporting the NBER, please contact: